Morgan Stanley just told investors to load up on South Korean equities, upgrading the market to overweight after a brutal stretch of selling that the firm believes has cleared the decks for a rebound. The thesis: a leverage washout in the market has improved the risk-reward profile for AI-linked and industrial stocks.
The KOSPI has been on a wild ride in 2026, with a 12.6% intraday plunge in late July driven by collapsing demand for AI chips. That session closed down roughly 6%.
The Morgan Stanley playbook
In a research note dated July 22, 2026, the firm laid out a selective but bullish case for South Korean equities. Morgan Stanley maintained a KOSPI target of 9,000, signaling significant upside from current levels.
The sector preferences tell a story about where the firm sees value after the washout. Banks are the top pick, followed by IT, industrials, and healthcare. The firm also upgraded telecom services to overweight.
